Notre Dame Law Review
Volume 26 | Issue 1
Article 1
10-1-1950
Public Utility Regulation and the Federal Antitrust
Laws
Louis C. Kaplan
Follow this and additional works at: http://scholarship.law.nd.edu/ndlr
Part of the Law Commons
Recommended Citation
Louis C. Kaplan, Public Utility Regulation and the Federal Antitrust Laws, 26 Notre Dame L. Rev. 5 (1950).
Available at: http://scholarship.law.nd.edu/ndlr/vol26/iss1/1
This Article is brought to you for free and open access by NDLScholarship. It has been accepted for inclusion in Notre Dame Law Review by an
authorized administrator of NDLScholarship. For more information, please contact [email protected].
NOTRE DAME
LAWYER
A Quarterly Law Review
VOL. XXVI
FALL, 1950
No. 1
PUBLIC UTILITY REGULATION AND THE
FEDERAL ANTITRUST LAWS
T
HE current vigorous enforcement of the federal antitrust laws by the Government has pointed to the
negessity of examining the general problems involved in
the relationship of these antitrust laws to regulation by
the several federal public utility commissions.
The subject will be considered along with three broad
topics: the philosophy underlying the conflict between free
enterprise and monopoly; the nature of the federal antitrust acts; and the relation of the federal antitrust laws
and their enforcement to public utility regulation by national agencies.
I.
Rival Theories-FreeCompetition vs. Monopoly
The possibility of dual regulation of the public utilities,
i.e., control by both the regulatory commission and the
antitrust authorities, has been the subject of strong comment by a number of both public utilities and antitrust
authorities. Thus, E. A. Smith, Senior Attorney of the
*The opinions expressed in this article are the personal ones of the writer
and are not to be construed as reflecting the views of any federal agency.
NOTRE DAME LAWYER
Illinois Central System, enunciated the following apropos
of this matter in an address delivered at the annual convention of the Public Utility Law Section of the American
Bar Association: 1
An eternal question in economics and consequently in
legislative policy and law, is whether competition or
regulation better protects the public interest in commerce
and industry. Students of public utility law have assumed
that the state legislatures and the Federal Congress made
the choice between what Chief Justice Stone once called
"rival philosophies" in so far as public utilities are concerned when they passed laws providing for the comprehensive regulation of public utilities and carriers.
But the antitrust division of the United States Department of Justice now thinks otherwise. That division is now
urging for the first time in almost half a century that
carriers regulated by the Interstate Commerce Commission
are subject to regulation in respect to the same rates by the
division through its power to enforce the Sherman Antitrust Act. This contention raises novel and important
questions of great concern, not only to carriers but to
shippers. It presents the question whether the nation's
carriers are to be subjected to two different and inconsistent policies of regulation, one administered by an agency
of Congress, and the other by an agency of the Executive.
In his provocative book on transportation, subtitled an
expos6 of monopoly control, written about five years ago,
Arne Wiprud, formerly a Special Assistant to the Attorney
General in the Antitrust Division, Department of Justice,
flatly stated: 2
There is a widespread belief that public utilities, particularly transportation, are immune from the provisions
of the antitrust laws because they are regulated industries.
This view is maintained despite the fact that courts have
repeatedly and consistently refused to recognize such a plea
whenever carriers have been charged with violations of the
antitrust laws.
1 Smith, The Application of the Antitrust Laws to Regulated Industries,
14 I. C. C. PRACt. J UR. 181 (1946).
2
WIPRUD,
JusTicE IN TRANSPORTATION
101
(1945).
FEDERAL ANTITRUST LAWS
However, Charles D. Drayton in his book, Transportation Under Two Masters, written about a year later,
was diametrically opposed to Wiprud, contending that:3
The real purpose of that act [Sherman Antitrust Act]
was to preserve competition in a field not subject to any
sort of regulation and wherein the only restraint upon the
fixing of unreasonable prices was competition.
supplied.)
(Emphasis
Mr. Justice Stone added the judicial touch to this controversy between the two authorities seeking control of
certain aspects of utilities' activities when he stated in a
leading antitrust case that there was "a choice between
rival philosophies" and that "it cannot be doubted that the
Sherman Law and the judicial decisions interpreting it are
based upon the assumption that the public interest is best
protected from the evils of monopoly and price control by
the maintenance of competition." I
It appears that there is no unanimity among those who
have studied the problem of dual control of regulated
industries. The proponents of the theory that there should
be dual regulation in this field of business feel that there
should be "continuing oversight of its regulatory agencies" "
by the Antitrust Division under the Federal antitrust acts.
The opponents of dual regulation, on the other hand, believe that such control would have the "effect of forcing
indiscriminate, helter-skelter, hit-or-miss competition" I of
the regulated enterprises. Precedent favors the proponents.
II.
The Nature of the Three FederalAntitrust Acts
The Sherman Antitrust Act of 1890 was designed to prohibit restraints of trade and monopolies in interstate com3
DRAYTON, TRmSPORTATION uNDER Two MAsTERs 13 (1946).
United States v. Trenton Potteries Co. et al., 273 U. S. 392, 397, 398, 47
S. Ct. 377, 71 L. Ed. 70 (1927).
5 WIPRUD, op. cit. supra note 2, at 170.
4
6 DRAYTON, op. cit. supra note 3, at 3.
NOTRE DAME LAWYER
merce. The basic provisions of the Act are Sections 1 and 2.
Section 1 provides:'
Every contract, combination in the form of trust or
otherwise, or conspiracy, in restraint of trade or commerce
among the several States, or with foreign nations, is declared to be illegal. .
.
. Every person who shall make any
contract or engage in any combination or conspiracy declared by sections 1-7 of this title to be illegal shall be
deemed guilty of a misdemeanor, and, on conviction thereof, shall be punished by fine not exceeding $5,000, or by
imprisonment not exceeding one year, or by both said
punishments, in the discretion of the court.
Section 2 of the Act provides: 8
Every person who shall monopolize, or attempt to
monopolize, or combine or conspire with any other person
or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations,
shall be deemed guilty of a misdemeanor, and, on conviction thereof, shall be punished by fine not exceeding
$5,000, or by imprisonment not exceeding one year, or by
both said punishments, in the discretion of the court.
Several comments on these two sections are noteworthy.
In a book entitled The Bottlenecks of Business, Mr. Thurman Arnold, the then head of the Antitrust Division,
stated:9
This is the plain intention of Congress in providing for
criminal penalties, i.e., to put a hazard on private combination-to compel businessmen to move with caution.
And Mr. Wiprud noted that "All of the important prosecutions by the Department of Justice, however, are under
the original" "oAct-i.e., the Sherman Act as distinguished
from the Clayton Act of 1914. The comments on this act
by Drayton are also of interest."
7
26
STAT.
209 (1890), as amended, 50 STAT. 693 (1937), 15 U. S. C. § 1
(1946).
8
26 STAT. 209 (1890), as amended, 15 U. S. C. § 2 (1946).
9
ARNOLD, THE BoTTLENEcxs or BusixEss 141 (1940).
WIPRUD, op. cit. supra note 2, at 101.
10
11
DRAYToN, op. cit. supra note 3, at 15.
FEDERAL ANTITRUST LAWS
Under the Sherman Act . . .no administrative body was
appointed; we repeat, the object was not regulation but
extirpation of "trusts" capable of suppressing competition.
Jurisdiction remained in the courts to entertain complaints
against persons or "trusts" seeking to restrain or monopolize trade. The Act contemplated that the natural forces
of competition should be permitted to protect the public
against higher prices likely to result from such practices.
It was assumed that economic progress would be promoted
under the theory of the survival of the fittest. If one competitor suffered extinction in this battle royal it was
assumed that such incidental loss would not have widespread effect. The general public interest was of paramount importance.
The conduct condemned by the Sherman Act falls into
two general categories: (1) restraint of trade, and (2)
monopoly. What is restraint of trade and what is monopoly
are left undefined by the statute. It is only when this
statute is read in the light of the body of judicial authority contained in the antitrust cases decided since 1890,
that there is given -to it concrete meaning not apparent
on its face. The Department of Justice, specifically the
Antitrust Division, has the powers to enforce this act. It is
the function of a prosecuting authority to develop the most
effective method of using the procedure which has been
given it. The tools of the Antitrust Division are the grand
jury and the suit in equity. Violators of the first three
sections of the Act are subject to criminal penalty." The
fourth section gives the Government the additional power
to enforce the Act by civil proceedings, without penalty.1"
12 The third section applies the Sherman Act specifically to the District of
Columbia. There, interstate commerce is not necessary.
13 26 STAT. 209 (1890), as amended, 50 STAT. 693 (1937), 15 U. S. C. § 4
(1946). It provides in part: "The several district courts of the United States
are hereby invested with jurisdiction to prevent and restrain violations of this
act; and it shall be the duty of the several district attorneys of the United
States, under the direction of the Attorney-General, to institute proceedings
in equity to prevent and restrain such violations. Such proceedings may be
by way of petition setting forth the case and praying that such violation shall
be enjoined or otherwise prohibited . . . and pending such petition and before
final decree, the court may at any time make such temporary restraining order
or prohibition as shall be deemed just in the premises."
NOTRE DAME LAWYER
In expressly providing for civil as well as criminal enforcement, the Sherman Act departs from the ordinary conception of the enforcement of the criminal law. But, an antitrust violation is not an ordinary crime. Violation is an
economic offense. The criminal procedure puts a hazard
on unreasonable business combinations by penalizing past
misconduct, while the civil action gives the court of equity
power to maintain competition in the future, or to reestablish it when it has been destroyed.
Concerning enforcement, one more comment from Ar14
nold's book is quite pertinent:
A large permanent staff in the field is not necessary.
One or two men located in the larger cities to receive
complaints . . . would be sufficient . ..
With such an
organization we could change what is now an unorganized
protest into an intelligently organized enforcement movement. With various existing consumer groups, such as
farmers, consumer associations, trade associations, women's
clubs, state and federal officials, retailers, manufacturers,
wholesalers and unemployed persons disseminating information gathered by the resident field staff, profiteering would
become unprofitable. (Emphasis supplied.)
From this, it would seem that the Justice Department
expects other federal officials to cooperate in the antitrust
enforcement.
Now what about the Clayton Act of 1914? Wiprud
stated that "the provisions of the Clayton Antitrust Act,
passed in 1914, supplement the Sherman Act." 11 Arnold
added: 16
That is all there is to the Act [Sherman Antitrust Act]
itself. Supplementing these provisions, the Clayton Act
was passed in 1914. The Department of Justice and the
Federal Trade Commission have concurrent jurisdiction to
enforce this Act, the Department by judicial proceedings
and the Commission by administrative proceedings subject
to court review. Administrative power was conferred upon
14
15
16
op. cit. supra note 9, at 203.
WiPRUD, op. cit. supra note 2, at 101.
APauoL, op. cit. supra note 9, at 136.
ARtOLD,
"FEDERAL ANTITRUST LAWS
the Commission upon the theory that this procedure is
more adequate to deal with some of the business problems
presented than the judicial process. (Emphasis supplied.)
Section 2 of the Clayton Act relates to price discrimination.' 7 Henderson in his excellent book on the Federal
Trade Commission commented upon this section:"'
Putting aside for the moment a definition of the word
"unfair," it is obvious that a case involving such practices
may be dealt with, according to the circumstances, under
Section 5 of the Federal Trade Commission Act, or under
Section 2 of the Clayton Act, or under both sections. If
the price tactics involve discrimination, a question arises
under Section 2 of the Clayton Act, which prohibits discrimination in price where the effect may be to substantially lessen competition or tend to create a monopoly.
If the discriminatory price tactics are aimed against one
or more competitors, the same state of facts may also give
rise to a proceeding under Section 5 of the Federal Trade
Commission Act. If no discrimination is involved, but
merely an "unfair" manipulation of the general price level,
the case can be dealt with, if at all, only under Section 5
of the Federal Trade Commission Act. The typical case,
however, could be dealt with under either section, and it is
the usual practice of the Commission, unless there are
special reasons to the contrary, to include in the same
complaint a count charging discrimination under the Clayton Act, and a count charging .an unfair method of competition.
Section 3 of the Clayton Act deals with exclusive or
"tying" contracts and is particularly noteworthy because
this type of contract is used by all sorts of businesses,
regulated as well as unregulated."
Section 7 of the Clayton
17 38 STAT. 730 (1914), as amended, 49 STAT. 1526 (1936), 15 U. S. C. §
13(a) (1946).
18 H NDFRsoN, THE FmERAs TRADE ComimmsaioN 247 (1924).
19 38 STAT. 731 (1914), 15 U. S. C. § 14 (1946): "It shall be unlawful
for any person engaged in commerce, in the course of such commerce, to lease
or make a sale or contract for sale of goods, wares, merchandise, machinery,
supplies or other commodities, whether patented or unpatented for use, consumption or resale within the United States or any Territory thereof or the
District of Columbia or any insular possession or other place under the jurisdiction of the United States, or fix a price charged thereof, or discount from,
or rebate upon, such price, on the condition, agreement or understanding that
the lessee or purchaser thereof shall not use or deal in the goods, wares, mer-
NOTRE DAME LAWYER
Act forbids intercorporate stockholding between competing
corporations, whether directly or through a holding company, where the effect may be to substantially lessen competition between the corporations involved, to restrain
trade, or to tend to create a monopoly.2" Section 8 prohibits interlocking directorates between companies of which
any one has a capital surplus and undivided .profits over
$1,000,000 where the companies are competitors.2 '
The above sections of the Clayton Act, together with
Section 5 of the Federal Trade Act,22 are under the permanent administration of the Federal Trade Commission.
The administration of Sections 7 and 8 present a somewhat peculiar situation. When two competitors consolidate, or by agreement restrict or eliminate competition,
there is a definite wrong to the public which relies upon
competition as the regulator of the quality and price of
commodities. Such conduct, it would appear, is peculiarly
within the province of the Sherman Act, with which, of
course, the Federal Trade Commission has no concern. Yet,
the FTC, under Sections 7 and 8, has a part in the administration of the consolidations.
The procedure before the Federal Trade Commission
has been delineated by Henderson:23
All formal proceedings before the Federal Trade Com-
mission must be set in motion by a complaint issued by
chandise, machinery, supplies or other commodities of a competitor or competitors of the lessor or seller, where the effect of such lease, sale, or contract for
sale or such condition, agreement or understanding may be to substantially lessen competition or -tend to create a monopoly in any line of commerce."
20 38 STAT. 731 (1914), 15 U. S. C. § 18 (1946).
21 38 STAT. 732-3 (1914), as amended, 15 U. S. C. § 19 (1946).
22 52 STAT. 111, 1028 (1938), 15 U. S. C. § 45 (1946). In part it provides:
"(a) Unfair methods of competition in commerce, and unfair or deceptive acts
or practices in commerce, are hereby declared unlawful.
The Commission is hereby empowered and directed to prevent persons, partnerships, or corporations, except banks, common carriers subject to the Acts, to
regulate commerce, air carriers and foreign air carriers subject to the Civil
Aeronautics Act of 1938, and persons, partnerships, or corporations subject to
the Packers and Stockyards Act, 1921 . . . from using unfair methods of competition in commerce and unfair or deceptive acts or practices in commerce."
23 Hmxasox,
op. cit. supra note 18, at 49.
FEDERAL ANTITRUST LAWS
the Commission, and served on the person complained of,
embodying the Commission's charges and setting a day for
a hearing. No one else can initiate a complaint. An individual aggrieved by an act of unfair competition or by
a practice condemned in the Clayton Act may of course
bring the matter to the Commission's attention and request that a complaint issue, but he does not thereby
become a formal party to the proceeding. He has no
remedy if the Commission refuses to issue a complaint, and
no control over the prosecution of the case if a complaint
is issued.
The Federal Trade Commission is authorized to file a complaint only when it "shall have reason to believe" that the
above-mentioned sections have been or are being violated.
There appears to be no limitation upon the means by
which the Commission acquires information of the violations. It might be acquired by personal observation of
the commissioners, from the daily press, or through, as is
the case in practice, sources of information organized by
the Commission.
It is to be emphasized that under both the Clayton Act
and the Federal Trade Commission Act, all that the Commission's order can do is to direct the respondent to "cease
and desist" from the unfair practice, and if the order concerns Section 7 or 8 of the Clayton Act, to divest of itself
of the stock held or require the resignation of the directors chosen contrary to law. The Commission cannot compel restitution, and no damages can be awarded or mandatory order entered. Where an unfair act has already
accomplished its purpose, and there is no threat of repetition, the Commission cannot give relief.
III.
National Regulatory Functions and Federal
Antitrust Enforcement
The regulation of the transportation industry by the
Interstate Commerce Commission in its relation to the
NOTRE DAME LAWYER
three Federal antitrust acts furnishes significant materials
for the study of the dual control situation.
The Interstate Commerce Commission has ruled in numerous cases that it has nothing to do with the enforcement
of the Sherman Antitrust Act.2" In fact, it was claimed
that the Commission is without authority to determine if
the antitrust act has been violated, and the most it could
do would be to lay the proof disclosed by investigation
before the Attorney General. In one of these cases, the
Commission succinctly stated :25
It is suggested that the rates now in force . . . are
unlawful because the lower rates were withdrawn as the
result of an agreement between the defendant companies,
which violates the anti-trust law...
The real difficulty is that the Commission has no authority to administer the anti-trust law [Sherman Act], or even
to determine whether that law has been violated. A court
of general jurisdiction could do so, but not an administrative body whose power is limited by the law which
created it. (Emphasis supplied.)
Over forty years later, the Supreme Court of the United
States reached the same conclusion as to the powers of the
Interstate Commerce Commission under the Sherman Act.
In the opinion of that case, which approved consolidation
of railroads thereby creating a partial monopoly, Mr. Justice Rutledge opined: 2"
To secure the continuous, close and informed supervision which enforcement of legislative mandates frequently
requires, Congress has vested expert administraive bodies
such as the Interstate Commerce Commission with broad
discretion and has charged them with the duty to execute
stated and specific statutory policies. That delegation does
not necessarily include either the duty or the authority to
24 Sprigg v. Baltimore and 0. 1.
Japan Trading Co. v. Georgia R. R., 12
v. Southern Ry., 12 I. C. C. 381 (1907).
25 Sprigg v. Baltimore and 0. R. R.,
26 McLean Trucking Co. v. United
S. Ct. 370, 88 L. Ed. 544 (1944).
R., 8 1. C. C. 443 (1900); China &
I. C. C. 236 (1907); Warren Mfg. Co.
supra note 24, at 456.
States et al., 321 U. S. 67, 79-80, 64
FEDERAL ANTITRUST LAWS
execute numerous other laws. Thus, here, the Commission
has no power to enforce the Sherman Act as such. It cannot decide definitively whether the transaction contemplated
constitutes a restraint of trade or an attempt to monopolize
which is forbidden by that Act. The Commission's task is
to enforce the Interstate Commerce Act and other legislation which deals specifically with transportation facilities
and problems. That legislation constitutes the immediate
frame of reference within which the Commission operates;
and the policies expressed in it must be the basic determinants of its action.
But in executing those policies the Commission may be
faced with overlapping and at times inconsistent policies
embodied in other legislation enacted at different times and
with different problems in view. When this is true, it cannot, without more, ignore the latter. The precise adjustments which it must make, however, will vary from
instance to instance depending on the extent to which
Congress indicates a desire to have those policies leavened
or implemented in the enforcement of the various specific
provisions of the legislation with which the Commission
is primarily and directly concerned...
Not only has
stated that it had
but it had, quite
force the act are
the Interstate Commerce Commission
no power to enforce the Sherman Law,
early, declared that proceedings to enonly cognizable in the courts.27
The Federal Trade Commission Act specifically exempts
common carriers from the corrective as distinguished from
the investigative action of the Federal Trade Commission.
Prior to the approval of the Motor Carrier Act of 1935,28
motor carriers were subject to the jurisdiction of the FTC
in both investigative and corrective action directed against
unfair trade practices forbidden by the Federal Trade
Commission Act. But the situation has changed. In an
27 Central Yellow Pine Ass'n. v. Illinois Cent. R. R., 10 I. C. C. 505, 540-I
(1905); "We deem it unnecessary to express an opinion as to whether this concert of action in fixing the advanced rate amounts to an unlawful agreement
under the so-called 'Anti-Trust Act'-the enforcement of that act being a matter properly cognizable by the courts." Also see Tift v. Southern Ry., 10 I. C.
C. 548, 579 (1905).
28 49 STAT. 543 (1935), 49 U. S. C. §§ 301, 302 (1946).
NOTRE DAME LAWYER
article written in 1935, the Honorable Robert E. Freer,
a member of the Commission, commented: 2"
Because of the broad definition of the phrase "acts to
regulate commerce," contained in the Federal Trade Commission Act, there seems to be no doubt but that interstate common carriers by motor vehicle, upon becoming
subject to the jurisdiction of the Interstate Commerce
Commission, immediately cease to be longer subject to any
part of the Federal Trade Commission Act, except those
paragraphs of Section 6 which provide that the Federal
Trade Commission, may, upon application to the Attorney
General or under direction of the President or the Congress, investigate and report facts relating to violations of
the anti-trust acts.
Mr. Freer added:"0
The debates in Congress in connection with the Federal Trade Commission Act would indicate that it was the
purpose of Congress in 1914 not to have the Federal Trade
Commission enter in any way the domain of the regulatory
power of the Interstate Commerce Commission.
He substantiated this statement by noting the remarks of
Representative Covington, Chairman of the subcommittee
which prepared the bill (FTC Act), who stated that the
committee had no desire to encroach upon the regulatory
province of the ICC. In relating the duties of Interstate
Commerce Commission to the Federal Trade Commission
Act, it must be realized that the interstate contract motor
carriers, although they also became subject to the jurisdiction of the Interstate Commerce Commission under the
Motor Carrier Act of 1935, are subject to the concurrent
jurisdiction of the Federal Trade Commission since only
common carriers were expressly exempted in the Federal
Trade Commission Act.
There is not much doubt that the Interstate Commerce
Commission has now become the enforcing authority of
the Clayton Act obligations of interstate carriers subject to
29 Freer, The Relation of Federal Anti-Trust Laws to Interstate Motor
Transportation, 2 FED. B. J. 247 (1936).
30 Id. at 248.
FEDERAL ANTITRUST LAWS
the jurisdiction of that Commission under the Motor Carrier Act of 1935. This is reasoned on the basis that Section 11 of the Clayton Act of 1914 vests in the Interstate
Commerce Commission the enforcement of Sections 2, 3, 7,
and 8 of the Clayton Act "where applicable to common
carriers." 31 As noted above, Section 2 prohibits discrimination in prices;8 2 Section 3 contains prohibitions against
"tying" or exclusive leases, sales, or contracts;"3 Section
7 restricts certain stock acquisitions; 3" and Section 8 forbids
interlocking directorates."
Section 11, it is to be noted,
also vests the enforcement of Sections 2, 3, 7 and 8 of
the Clayton Act in the Federal Communications Commission "where applicable to common carriers engaged in wire
or radio communication or radio transmission of energy";
in the Civil Aeronautics Authority "where applicable to air
carriers and foreign air carriers subject to the Civil Aeronautics Act of 1938"; in the Federal Reserve Board "where
applicable to banks, banking associations and trust companies"; and in the Federal Trade Commission "where
applicable to all other character of commerce." Public
utilities such as electric and gas companies, are not provided for in a similar fashion by Section 11.
The best summary of the relation of the Interstate Commerce Commission's regulatory functions to Federal antitrust enforcement is to be found in the already-mentioned
article by Commissioner Freer, who stated: 6
81 38 STAT. 734 (1914), 15 U. S. C. § 21 (1946). It provides in part:
"That authority to enforce compliance with sections two, three, seven and
eight of this Act [Clayton Act] by the persons respectively subject thereto is
hereby vested: in the Interstate Commerce Commission where applicable to common carriers subject to the Interstate Commerce Act, as amended. . .
"
The
rest of -the Section provides for similar enforcement authority of wire and radio
communication and transmission carriers, air carriers, banks and trust companies by the national agencies vested with the general regulatory powers over the
subjects.
32 38 STAT. 730 (1914), as amended, 49 STAT. 1526 (1936), 15 U. S. C. §
13 (1946).
33 38 STAT. 731 (1914), 15 U. S. C. § 14 (1946).
34 See note 20 supra.
35
36
See note 21 supra.
See FREER, supra note 29, at 248.
NOTRE DAME LAWYER
I expect to suggest to you that the Interstate Commerce
Commission regulation displaces that of the Federal Trade
Commission in respect of unfair competition of common
carriers leaving contract carriers subject to both; that it
transfers enforcement duties under the Clayton Act from
the Federal Trade Commission to the Interstate Commerce
Commission in respect of common carriers, but leaves in
the Federal Trade Commission those duties in respect to
contract carriers, and that while the Sherman Act still
applies to all motor carriers, common and contract carriers
are in some particulars given exemption therefrom because
of the ICC regulation.
Since this resum6 was written by one of the heads of the
Federal Trade Commission who was intimately concerned
with the exercise of duties given to his agency in relation
to the work of the Interstate Commerce Commission, it is
of especial significance.
The Federal Communications Commission also has an
additional role in the enforcement of the antitrust acts.
By the provisions of Section 313 of the Communications
Act of 1934, the Commission is authorized to withhold
radio station construction licenses from violators of the antitrust laws.3" This section makes the federal antitrust laws
applicable to radio communication and apparatus. 8 The
37 48 STAT. 1086 (1934), 47 U. S. C. § 311 (1946). In part it provides:
"The Commission (FCC) is hereby directed to refuse a station license and/or the
permit hereinafter required for the construction of a station to any person (or to
any person directly or indirectly controlled by such person) whose license has
been revoked by a court under section 313 of this title, and is authorized to
refuse such station license and/or permit to any other person (or to any person
directly or indirectly controlled by such person) which has been finally adjudged
guilty by a Federal court of unlawfully monopolizing or attempting unlawfully
to monopolize radio communication, directly or indirectly, through the control
of the manufacture or sale of radio apparatus, through exclusive tariff arrangements, or by any other means, or to have been using unfair methods of
competition .... 2
38 48 STAT. 1087 (1934), 47 U. S. C. § 313 (1946). It provides in part:
"All laws of the United States relating to unlawful restraints and monopolies
and to combinations, contracts, or agreements in restraint of trade are hereby
declared to be applicable to the manufacture and sale of and to trade in radio
apparatus and devices entering into or affecting interstate or foreign commerce
and to interstate or foreign radio communications. Whenever in any suit, action,
or proceeding, civil or criminal, brought under the provisions of any of said laws
or in any proceeding brought to enforce or to review findings and orders of the
Federal Trade Commission or other governmental agency in respect of any
FEDERAL ANTITRUST LAWS
validity of the provisions of Section 311 have already been
tested in the Supreme Court in the case of National Broadcasting Co. v. United States et al.as There Mr. Justice
Frankfurter stated: 40
That the Commission [Federal Communications Commission] may refuse to grant a license to persons adjudged
guilty in a court of law of conduct in violation of the
anti-trust laws certainly does not render irrelevant consideration by the Commission of the effect of such conduct
upon the "public interest, convenience, or necessity" . . .
Congress can hardly be deemed to have limited the concept of "public interest" so as to exclude all considerations
relating to monopoly and unreasonable restraints upon
commerce.
Closely following the above statement, the learned Justice
commented on the functions of the Communications Commission, by quoting with approval from the Commission's
Report on Chain Broadcasting: 4 1
"The prohibitions of the Sherman Act apply to broadcasting. This Commission, although not charged with the
duty of enforcing that law, should administer its regulatory powers with respect to broadcasting in the light of
the purposes which the Sherman Act was designed to
achieve. . . . While many of the network practices raise
serious questions under the antitrust laws, our jurisdiction
does not depend on a showing that they do in fact constitute a violation of the antitrust laws. It is not our function to apply the antitrust laws as such. ...."
This pronouncement makes the Sherman Act truly assume
the characteristics of a "charter of freedom,"
42
which
affects the national Government in all its works.
matters as to which said Commission or other governmental agency is by law
authorized to act, any licensee shall be found guilty of the violation of the pro-
visions of such laws or any of them, the court, in addition to the penalties
imposed by said laws, may adjudge, order, and/or decree that the license of
such licensee shall, as of the date the decree or judgment becomes finally effective or as of such other date as the said decree shall fix, be revoked and that
all rights under such license shall thereupon cease...."
39 319 U. S.190, 63 S.Ct. 997, 87 L. Ed. 1344 (1943).
40 Id. at 222-3.
41 Id. at 223.
42 Hughes, C. J., in Appalachian Coals, Inc. v. United States, 288 U. S.
344, 359, 53 S.Ct. 471, 77 L. Ed. 825 (1933).
NOTRE DAME LAWYER
United States v. Borden Company et al.43 illustrates in
a more positive manner the influence of the antitrust laws
upon the regulatory functions of a Government agency.
There the Secretary of Agriculture ran afoul of the federal
anti-monopoly statutes by the overzealous application of
the Agricultural Marketing Agreement Act of 1937.4 The
Supreme Court, through Chief Justice Hughes, said: 4 5
That the field covered by the Agricultural Act is not
coterminous with that covered by the Sherman Act is manifest from the fact that the former is thus delimited by the
prescribed action participated in and directed by an officer
of government proceeding under the authority specifically
conferred by Congress. As to agreements and arrangements not thus agreed upon or directed by the Secretary,
the Agricultural Act in no way impinges upon the prohibitions and penalties of the Sherman Act, and its condemnation of private action in entering into combinations
and conspiracies which impose the prohibited restraint upon
interstate commerce remains untouched.
The Securities and Exchange Commission's functions
under the Public Utility Holding Company Act of 1935 "
were scrutinized in a law review article published about
a year ago:
47
Two other features of the Utility Act are worthy of
mention whenever antitrust problems are being considered.
The first is the effective reliance under the Utility Act upon
an administrative body for enforcement. The SEC was
given the task of solving the "essentially economic and
administrative problems for which in the Sherman Act
cases (the court) had no assistance except that of opposing
counsel." Congress had intended that the FTC perform
a similar function under the Sherman Act, since the courts
and the Department of Justice were not considered as
fitted for the reconstruction and constant supervision over
business organizations required. The failure of the courts
43
44
308 U. S. 188, 60 S. Ct. 182, 84 L. Ed. 181 (1939).
48 STAT. 31 (1933), as amended, 50 STAT. 246 (1937), 7 U. S.
C. §
601
(1946).
46
See note 43 supra, 308 U. S. at 200.
49 STAT. 803 (1935), 15 U. S. C. § 79 et seq. (1946).
47
Trienens, The Utility Act as a Solution to Sherman Act Problems, 44
45
ILL. L. Rzv. 337 (1949).
FEDERAL ANTITRUST LAWS
to call upon the FTC for advice may indicate the desirability for placing the primary responsibility upon an expert body rather than upon the Department of Justice
and the courts.
In view of the hitherto vigorous Government antitrust
campaign, the foregoing statement appears more as an expression of pious hope rather than an indication of a current trend.
Section 10(h) of the Federal Power Act in establishing
the basis on which licenses are to be issued by the Federal
Power Commission provides :48
Combinations, agreements, arrangements, or understandings, express or implied, to limit the output of electrical
energy, to restrain trade, or to fix, maintain, or increase
prices for electrical energy or service are hereby prohibited.
The origins of this section appear to go back as far as
1914, an unprecedented year for the champions of the
anti-monopoly theory. It is quite possible that "restraint
of trade" in this section connotes the same thing that is
meant by the phrase in the Sherman Antitrust Act. Legislative terminology has a rather enduring quality. The
Justice Department and not the Commission has the duty
of enforcing the federal antitrust laws. But here, under
Section 10(h) the Commission has a similar duty to perform -in the public interest. Proper performance of this
duty would necessitate a prohibition on a licensee selling
electrical energy in restraint of trade. Thus the Antitrust
Division in the "Blue book" on the federal antitrust laws
considers this section as a related law.49
Section 20(a) of the Natural Gas Act relating to the
"Enforcement of Act; Regulations and Orders" provides: 50
The Commission may transmit such evidence as may
be available concerning such acts or practices [under the
48 41 STAT. 1068 (1920), as amended, 49 STAT. 842 (1935), 16 U. S. C. §
803 (1946).
40 CCH, TE FEDERAL ANTITRusT LAws wr SumMARY OF CASES INSTITUTED BY THE UNITED STATES, 6, 53 (1949).
50 52 STAT. 832 (1938), 15 U. S. C. § 717(s) (1946).
NOTRE DAME LAWYER
Natural Gas Act] or concerning apparent violations of the
Federal antitrust laws to the Attorney General, who, in
his discretion, may institute the necessary criminal proceedings.
This provision recognizes that the Federal antitrust laws
are applicable to the natural-gas companies. The fact that
the Federal Power Commission is a regulatory body and
may have its own particular conceptions of regulation
makes no difference if the transaction involved is a violation of antitrust laws.
The belief, still existing in some quarters, that public
utilities are immune from the provisions of the federal
antitrust laws because they are industries already being
regulated by national administrative agencies is entirely
unfounded. From the early years of the operation of the
Sherman Act, the Supreme Court has refused to recognize
the immunity of carriers which have been charged with
violations of the antitrust acts 5 1 The other public utilities
must, therefore, be considered in no better position than
the carriers in the application of these laws. As a matter
of fact, the writers of a number of authoritative law review
articles have pointed out that the antitrust laws have been
applied with greater strictness to carriers than to unregulated industries. One author declared: 52
But the railroad cases really are in a class by themselves. They are public utility cases. The units were
tangibly immense. And there was a recognition that the
units themselves were monopolistic.
This might have led
the court to the conclusion that the Sherman Act did not
apply or if it did apply then it did so with greater leniency than elsewhere.
But the contrary was the result.
Possibly the feeling was that it is better not to add one
monopoly to another. . . . And the basis for the treatment is probably the same--a franchise has been given;
51 Georgia v. Pennsylvania R. R., et al., 324 U. S. 439, 456, 65 S. Ct. 716,
89 L. Ed. 1051 (1945); McLean Trucking Co. v. United States, 321 U. S. 67,
86, 64 S. Ct. 370, 88 L. Ed. 549 (1944).
52 Levi, The Antitrust Laws and Monopoly, 14 U. oF CHi. L. Rwv. 153,
157 (1946-47).
FEDERAL ANTITRUST LAWS
it is necessarily monopolistic; an attempt to extend the
franchise will be carefully scrutinized.
Another writer remarked:"
To this liberal interpretation given the Sherman and
Clayton Acts when applied to most branches of commerce,
the literal interpretation applied when railroads are involved is in striking contrast. It would seem more natural,
with the great power of control afforded the Interstate
Commerce Commission over the rates and services of the
carriers, that the emphasis on competition would diminish
and public protection be sought in the supervision of the
Commission. However, the decisions of the Court tend to
the opposite....
Nor does approval of a transaction by a regulatory commission exempt the transaction from the antitrust laws. 4
Further, the regulatory and administrative agencies are
require4 to observe all other laws in the performance of
their particular duties. Thus, in Southern Steamship Co. v.
National Labor Relations Board, the Supreme Court enunciated the following principle:"'
It is sufficient for this case to observe that the Board
has not been commissioned to effectuate the policies of the
Labor Relations Act so single-mindedly that it may wholly
ignore other and equally important Congressional objectives. Frequently the entire scope of Congressional purpose calls for careful accomodation of one statutory scheme
to another, and it is not too much to demand of an administrative body that it undertake this accommodation
without excessive emphasis upon its immediate task.
More specifically, in the National Broadcasting Co. case,56
the Federal Communications Commission was required, in
the exercise of its own statutory duties, to take account
of the antitrust laws.
53 See note, Application of the Sherman and Clayton Acts to Holding Companies Organized by Parent Railroad Corporations, 78 U. oF PA. L. Rxv. 652,
654 (1929).
54 Georgia v. Pennsylvania R. R., 324 U. S. 439, 65 S. Ct. 716, 89 L. Ed.
1051 (1945).
55
56
316 U. S. 31, 47, 62 S. Ct. 886, 86 L. Ed. 1246 (1942).
See note 39 supra.
NOTRE DAME LAWYER
In view of the foregoing, the rule may be generalized:
industries, although regulated by specific federal agencies,
are not immunized from the purview of the federal antitrust laws.
Conclusion
Since the carriers and public utilities appear to be .within
the purview of the federal antitrust laws, it is pertinent
to know what the regulatory commissions vested with the
administration and regulation of public utility enterprises
are expected to do in dealing with antitrust matters. These
regulatory bodies are not required to enforce the antitrust
laws. All they can do is to lay the proof of an apparent
antitrust violation before the Department of Justice. The
supporters of the idea that the antitrust authorities should
"keep hands off" regulate4 industries contend that the complete regulation of public utilities would be better accomplished through an administrative tribunal which would
be continuously in session and capable of applying from
day to day its accumulated experience and expert knowledge of the many and complex questions arising in the
regulation of the rates and services of a public utility.
Further, they claim that under the Sherman Act there is
no such continuous or orderly regulation. But none was
contemplated. The object of the Act was not regulation,
but the extirpation of "trusts," and that the Sherman law
has continually adhered to the classical school of economics
which taught that the natural forces of competition should
be permitted to protect the public against economic maladjustments resulting from the monopolization of trade.
The adherents of this view usually conclude by stating
emphatically that the application of the free competition
theory as envisioned by the Sherman Act would be disastrous to the public utilities and would result in "cutthroat" competition.57
57 For an example of such an argument see DRAYTON, op. dt. supra note
3, at 15.
FEDERAL ANTITRUST LAWS
They also suggest that administrative body in the
proper exercise of its mandatory duties is outside the provisions of the antitrust acts. In support of this proposition
is Parker v. Brown, 8 which decided the validity of the
enforcement of a state agricultural proration program:"
But it is plain that the prorate program here was never
intended to operate by force of individual agreement or
combination. It derived its authority and its efficacy from
the legislative command of the state and was not intended
to operate or become effective without that command. We
find nothing in the language of the Sherman Act or in its
history which suggests that its purpose was to restrain
a state or its officers or agents from activities directed
by its legislature ...
The Sherman Act makes no mention of the state as such,
and gives no hint that it was intended to restrain state
action or official action directed by a state....
There is no suggestion of a purpose to restrain state
action in the Act's legislative history. The sponsor of the
bill which was ultimately enacted as the Sherman Act
declared that it prevented only "business combinations." ...
True, a state does not give immunity to those who violate the Sherman Act by authorizing them to violate it, or
by declaring that their action is lawful ...
Armed with their argument, which is quite sound, and
with the above noted decision, certain regulatory bodies
are content to disregard antitrust matters, provided they
properly and efficiently carry out their statutory duties.
In view of the Supreme Court's pronouncements in the
Southern Steamship Company and National Broadcasting
Company cases it is rather difficult to state with certainty
that the "do-nothing" attitude is a safe course. It must
be admitted that the Department of Justice and the Antitrust Division appear to have been unconcerned about
commissions operating under effective organic acts in a very
efficient manner. Thus, one authority on transportation
has lamented that the Justice Department trusts the Fed58
317 U. S. 341, 63 S. Ct. 307, 87 L. Ed. 315 (1943).
59
Id. 317 U. S. at 350-1.
NOTRE DAME LAWYER
eral Communications Commission to regulate in respect to
telephone and telegraph rates, but does not do so in the
matter of carrier rates." But in this instance, Wiprud has
indicated the reason for the antitrust authorities' concern
with the Interstate Commerce Commission: "The Interstate Commerce Act does not provide within itself the
remedies for the correction of all the evils in rate making
which might constitute a violation of the Sherman Act." 61
On the other hand, as far back as twenty years ago, a writer
on the antitrust laws as related to public utilities declared: 6"
What of other types of public service? An increasingly
large amount of natural gas is crossing state lines; so also
of electricity, about ten percent of which already passes
in interstate commerce.
There has been considerable re-
straint of competition in these fields, both by contracts
and by direct or indirect mergers. As yet we have no
judicial- decision on them, as there has been no prosecution, although a series of official investigations is still going
on and certain politicians are loudly pounding the tom-
toms against "the power trust." What will be the attitude
of the-Supreme Court of the United States? Will it be as
strict as it has been against the transportation utilities, or
will it consider that changing times require a different con-
cept of contemporary public policy.
tell.
Only the future can
Two decades later, the questions raised in the above quotation are still germane, and provide especial concern to those
who feel that the antitrust authorities have no business
melddling in matters already under regulation.
A really good "out" is, of course, statutory exemption.
By this means a regulatory agency can relieve itself from
interference from what some utility experts designate as
"outmoded" and "archaic" antitrust laws. Wiprud wrote:6 "
"Regulated". industries are not per se exempt from the
Sherman Act. The regulatory statute must provide for relief
60
61
62
(1930).
63
See SS-H, supra note 1, at 194.
WiPRUD, op. cit. supra note 2, at 118.
Hadley, Public Utilities and the Anti-Trust Law, 10 B. U. L. Rav. 351
WxpRuD, op. cit. sura note 2, at 114.
FEDERAL ANTITRUST LAWS
in specific terms. And those terms must be followed before
immunity can be obtained from the prohibitions of the
Sherman Act. (Emphasis supplied.)
He continued: 64
Since the Antitrust Act is a general prohibition against
price fixing, it is applicable in the absence of specific exemption in some other statute. Therefore it is not a question of whether the Interstate Commerce Commission Act
prohibits the practice, as the Commission contends, but
whether the practice is sanctioned by that act.
This method of securing immunity from the antitrust laws
is not novel, and has already been achieved through several provisions of law.6
The very best manner of coping with the antitrust situation, it is suggested, is for -a regulatory agency to set up
a definite plan for cooperation with the antitrust enforcement authorities of the Justice Department. In one leading law review article, the authors stated: 66
It has recently been reported that Mr. Arnold [then
head of the Antitrust Division] and Secretary Hopkins
[Commerce] have worked out an arrangement whereby
the Department of Commerce will assist defendants who
wish to open negotiations for settlement by consent [i.e.,
consent decrees]. The assistance presumably extends to
advice on what terms should go into the proposed decree.
Whether or not this practice should be formalized by
statute as the Antitrust Division has proposed, it gives
promise of minimizing the contentiousness of future antitrust proceedings.
Surely, if such an arrangement appeared workable, the
administrative and regulatory commissions can devise their
64 Id. at 116.
65 For example, § 5(8) of the Interstate Commerce Act (Bullwinkle Bill)
excepting the carrier rate bureaus, STAT. 482 (1920) as amended, 49 U. S. C. §
5 (1946); § 29 of Merchant Marine Act, 41 STAT. 1000 (1920), 46 U. S. C. 885
(b) (1946), from § 1 of the Clayton Act, 38 STAT. 730 (1914), 15 U. S. C. § 12
(1946); § 8(b) of the Agriculture Marketing Act of 1937, 50 STAT. 246 (1937),
7 U. S. C. 608 b (1946) as amended 61 STAT. 208 (1947), 7 U. S. C. 608 b
(Supp. 1949), excepting marketing agreements; permitting agricultural producers
to act together in associations under § 1 of the Capper-Volstead Act, 42 STAT.
388 (1922), 7 U. S. C. § 291 (1946).
66 Isenbergh and Rubin, Antitrust Enforcement Tkrough Consent Decree,
53 HARv. L. REv. 386, 392 (1939).
NOTRE DAME LAWYER
own methods and plans for bringing antitrust matters to
the attention of the Department of Justice.
Perhaps the time is not too far distant when the "naive
assumption of a sharp dichotomy between competition and
monopoly," 67 usually made when antitrust cases are decided in the courts, will disappear. A new assumption, more
realistic of the actual market-place, could then be made in
antitrust cases, particularly those involving industries where
a conflict between free competition and sovereign-granted
monopoly is ever in issue. If this happens, then Mr. Bernard Baruch will not have to pose the question, as he did
in the "Foreword" of Drayton's TransportationUnder Two
Masters, that "It is difficult to see why any branch of the
Government, like the Department of Justice, should take
action against the railroads which were already subject to
the regulation by the Interstate Commerce Commission." "8
There would also be less occasion to criticize the motives
for the Government's antitrust enforcement policy.69 If
the arbitrary and academic division between concepts of
competition and monopoly largely disappears, there could
be a more realistic approach to the antitrust problems of
the regulated industries. Antitrust authorities and regulatory commissions could meet on common ground to preserve the time-honored antitrust acts. To date this has not
been realized in a satisfactory manner.7"
Louis C. Kaplan
67 See note, Preservation of Competition through Federal Antitrust Laws,
51 HARv. L. REv. 694, 701 (1937).
68 See DRAYTON, op. cit. supra note 3, at IX.
69 Mason, The Current Status of the Monopoly Problems in the United
States, 62 HARV. L. REv. 1284 (1949).
70 The conflict between the antitrust authorities and regulatory commissions is continually cropping up in litigation in Federal courts. The more recent case of United States v. Inter-Island Steam Nay. Co. et al., 87 F. Supp.
1010 (D. C. Hawaii 1950) involved, among other things, the question of primary jurisdiction of the Civil Aeronautics Board under the Sherman Act. The
federal district court .took a dim view of administrative prerogative
And in the United States v. Railway Express Agency, Inc., 89 F. Supp. 981
(Del. 1950) the district court also took the view that it had plenary jurisdiction
in antitrust matters even if there were administrative questions involved.